What’s Up With the No Climate Tax Pledge?

Do you know about the No Climate Tax pledge? I didn’t until I read a column over the weekend by the Washington Post’s always-interesting Catherine Rampell.

The vow is sponsored by Americans for Prosperity, a conservative political advocacy group closely associated with the Koch brothers. And it was something of a big deal a couple of years ago in conservative circles. By my count, about 140 members of the House, 26 senators, and 8 governors (along with hundreds of state legislators) signed it. Among them:  current GOP presidential hopefuls Ted Cruz, Marco Rubio, Rand Paul, and Scott Walker.

This is what it says:

I, ______________, pledge to the taxpayers of the state of _________ and to the American people that I will oppose any legislation relating to climate change that includes a net increase in government revenue.

It turns out that this isn’t much of a “no climate tax” pledge at all.

Note that the promise is merely to oppose only climate change legislation that results in net new revenue to the government. Thus, signatories are not necessarily objecting to a carbon tax, as long as the revenue is used to finance other tax cuts.

They almost always are.

In truth, every carbon tax plan I’ve seen would use at least some new revenue for a refundable credit or other rebate to soften the blow for low-income households. My TPC colleagues Eric Toder and Donald Marron described some of these trade-offs in this 2014 article in the American Economic Review.  In a separate paper, Eric and Donald suggested using carbon tax revenue to buy down corporate taxes as well as to provide some relief for low-income households.

Would policymakers also want to use some revenue to reduce the deficit or fund new programs? They could, of course. But raising revenue is hardly an essential goal of a carbon tax.

The same is true of its cousin, a cap-and-trade regime. That design once had strong GOP support (John McCain backed it in his 2008 presidential run against Barack Obama).  But as soon as President Obama adopted the idea, Republican support withered.

The real question, then, is what is this pledge really about? Does it mean, though it does not say, that the signers oppose any tax solution to climate change? If so, that could paint these pols into an awkward policy corner.

Of course, if you do not believe that climate change is real, or that human activity has anything to do with it, it is easy enough to reject all policy solutions to a non-problem.

But if you acknowledge that climate change is a concern and that adjusting human behavior can slow the phenomenon, you really have only two effective policy levers at your disposal. You can impose reams of highly detailed regulations on emissions from specific sources or you can raise the price of carbon, either with a tax or by limiting total emissions and letting the market set the price. Nothing else is going to work very well.

Once, Republicans overwhelmingly favored market-based solutions over direct regulation. And many conservative economists still hold that view. The interesting question for those who inked the “no climate change tax“ pledge —especially the presidential hopefuls-- is why did they sign? Do they think climate change is a fraud? Do they prefer regulatory solutions? Or do they merely oppose tax increases?

If it is the latter, maybe a carbon tax isn’t quite as much of a non-starter as the pledge would suggest.